The Future of Pharmaceutical Industry in India
] 'The current population of India is 1,337,670,750 as of 2017, based on the latest United Nations estimates that India population consists of 17.86% of the world’s population and foreseen to overtake China’s already massive population by 2028 2. The population density in India is 452 per Km2 with an extensive land area of 2,972,892 km2 where 32.8 % of the population is urban dwellers 3. In India, there are more than 20 official languages that are recognized where primarily, Hindi and English is the most used language to communicate 2. As an emerging economic powerhouse, it is no doubt that India is the largest provider of generic medicines worldwide 4. Indian pharmaceutical sector accounts for about 2.4% of the global pharmaceutical industry in value terms and 10% in volume terms. The market size of the country’s pharmaceutical industry is estimated to be over USD 20 Billion 5. India has an abundant pool of skilled labour as well as low labour costs.19 ] ''''India’s economy in the pharmaceutical market has been increasing as the years passed. Based on the graph, India’s GDP growth will overtake Brazil, China and Russia ultimately. This brings large income for India to grow and the country is moving forward, thereby attracting more countries to collaborate with India. Analysis of India’s Pharmaceutical Industry Porter’s Diamond Model Based on Porter’s Diamond Model, we can dive into his four dimensions - Firm’s Strategy, Structure & Rivalry, Factor Conditions, Demand Conditions at home and Related & Supporting Industries to promote competitive advantage based on India’s pharmaceutical industry. ' ' Firm Strategy, Structure & Rivalry Most of the Indian pharma companies are developing niche portfolios in multiple divisions specifically for the US market, focusing on producing high margin injectables, dermatology, respiratory, biosimilars, complex generics and many more 7. In India, there are 10,500 producers and more than 3,000 pharma companies 8. Major companies have increased their R&D expenditure to build various niche drugs 7. Thereby, optimizing the organisation growth and margins. ' ' Factor conditions Inexpensive labor, strong government support, and lower production costs contribute to India’s rising pharma industry. Many pharma MNCs appear to be taking advantage of India’s cheap labor through India-based subsidiaries. India’s government supports the pharma sector by fiscal incentives and easing development procedures which boasts lower R&D and manufacturing costs. The cost of production has been a leading source of India’s industry strength, as India is 60% cheaper than the U.S. and 50% cheaper than Europe in terms of drug production costs 9. ' ' Demand conditions at home As India’s population and economy is booming, a substantial amount of middle class citizens thus are able to afford Western Medicines. Due to the increased amount of citizens contracting cardiovascular problems, disorders of the central nervous system and many other chronic diseases, there is a surge of demand for treatment 6. ' ' Related and supporting industries India’s government allows up to 74% Foreign Direct Investments(FDI) under automatic route, giving smaller firms a higher capital allowing it to increase output; aiming to promote the pharmaceutical sector 5. ' ' Foreign Direct Investment (FDI) As a welcoming move, the Indian government has allowed 100% FDI in Greenfield pharmaceutical projects under the automatic route. Also, they allowed a range of 74% to 100% FDI in Brownfield pharmaceutical projects which is subject to the government’s approval 10. Having done so, not only does it make advanced medications and drugs accessible to the Indian patients, it also helps boost employment in the pharmaceutical sector 11. ' ' Alternative Markets Online Pharmacies Online Pharmacies are where consumers themselves can buy prescribed medicines through the Internet. Developing countries like India needs more basic healthcare as many rural areas have low level of health facilities due to the lack of infrastructure. Furthermore, 70% of India’s population are living in rural areas. Therefore, online pharmacies can help India meet its healthcare objectives 12. With regards to India’s pharmaceutical industry, its medicine market is expected to rise to $55 billion in 2020 due to more firms entering the e-commerce business for online pharmacies 13. Telemedicine Since India’s urban areas have access to medical needs while the rural areas have limited access to such facilities, technology can help to eliminate this gap. With the use of technology, consultations can be held using mobile devices which allows convenient and swift access to medical help 13. ' ' To prevent consumers’ risk of purchasing counterfeit drugs, the Government of India plans to create a centralized platform to regulate e-pharmacies. Through this centralized platform, all pharmacies are required to be registered and comply with the Drugs and Cosmetic Act 14. ' ' “All unregistered entities would then be easy to identify and address, once the legitimate players are known to all,” said Shri K L Sharma, Joint Secretary Ministry of Health and family welfare Government of India 13. Forecasts Mr. Arun Kumar Singh, India's ambassador to the United States, has said at the American Association of Physicians of Indian-Origin (AAPI) that by 2020, India will most likely be in the top three pharmaceutical markets in terms of incremental growth. It will also be the sixth largest globally in terms of absolute size 15. ' ' Revenue ' ''' ' Within 11 years, from 2005 to 2016, India’s revenue has been increasing rapidly from USD 6 billion to USD 36.7 billion. According to Department of Pharmaceuticals et. al, it is forecasted that by 2020, the revenue of the Indian pharmaceutical sector will rake in about USD 55 billion. The compound annual growth rate (CAGR) is 15.92% which represents that the pharmaceutical industry has been and will continue to be profitable in the future. ' ' Source: 16 ' ' With 70% of market share (in terms of revenue), generic drugs form the largest segment of the Indian pharmaceutical sector.India supply 20% of global generic medicines market exports in terms of volume, making the country the largest provider of generic medicines globally and expected to expand even further in coming years Over the Counter medicines and patented drugs constitute 21% and 9%, respectively, of total market revenues of US$20 billion. ' ' Exports ' ' According to the Indian Drug Manufacturers’ Association, India has traded pharmaceutical products that are worth USD 16.89 billion. They have forecasted that it will be worth USD 40 billion by 2020. This contributes to the generation of revenue into the country 17. ' ' Market Source: 18 ' ' According to McKinsey & Company, the size of the Indian pharmaceutical market is expected to expand over the years from 2009 to 2020. Pessimistic cases are expected to increase by a CAGR of about 10%. Base cases are expected to increase by a CAGR of about 14.5%. Lastly, aggressive cases are expected to increase by CAGR of about 17%. By 2020, the size of the Indian pharmaceutical market will be worth about USD 160 billion. ' ' Conclusion & Recommendations We would recommend FDI investors to enter the India’s pharmaceutical market using the Greenfield investment entry strategy. This allows the company to have a full control of their business operations and processes as well as lessen the intermediary costs. With full control, the company is better able to maintain the standards and it is an opportunity for companies to create and maintain long term relationships with its employees and partners. ' ' With this strategy, companies can better understand and adapt to the foreign market and alter the prices and products to suit the needs of the local market. As mentioned earlier, Mr. Arun Kumar Singh has mentioned that India will most likely be in the top three pharmaceutical markets in terms of incremental growth by 2020. With the population growing, the demand for pharmaceutical needs will increase as well. This will create ample opportunities for businesses to grow. ' ' With advantageous low labour costs and India having an abundant pool of skilled labour, hiring inefficient workers will not be a concern. Moreover, English is widely used in India when it comes to business, which reduces the communication barrier when interacting with employees and investors. Also, there are many friendly policies and schemes in place which makes it more attractive to investors. Therefore, the future of India’s pharmaceutical industry is on the road to advancing and growing well. ' ' =References= 1. http://www.studentsinwarsaw.com/wp-content/uploads/2015/05/India-map.jpg ' ' 2. 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